Study: Operating Charity Investment Returns Rise to an Average of 15.1 Percent in Fiscal Year 2013

(Press release, Nov. 10, 2014) — Fiscal year 2013 investment returns for the 60 organizations participating in the FY2013 Commonfund Benchmarks Study^® of Operating Charities rose to an average of 15.1 percent in fiscal 2013 compared with an average return of 11.7 percent for FY2012.
The data, compiled and published by Commonfund Institute, reflect the investment management and governance practices and policies of 23 cultural organizations, 19 religious institutions and 18 social service organizations. The 60 organizations participating in the Study represent $24.3 billion in assets. Return data-reported net of fees throughout the Report-and all other Study data are for fiscal 2013 (January 1, 2013 to December 31, 2013).

Three-year net returns for participating operating charities averaged 8.5 percent (up from 7.6 percent a year ago); trailing five-year returns averaged 11.6 percent (well ahead of 2.2 percent a year ago, as the poor -25.8 percent return of FY2008 dropped out of the five-year calculation); and 10-year returns averaged 7.1 percent (7.6 percent last year).

Participating charities' highest return, at 31.1 percent, was produced by domestic equities, followed by international equities at 17.3 percent. Alternative strategies returned 10.5 percent, while short-term securities/cash/other returned 0.0 percent. Fixed income was the only major asset class to produce a negative return, at -0.7 percent.

This year's return profile was quite different from last year's. Like this year, traditional equities led the way in FY2012, with nearly equal returns of 16.9 percent for international equities and 16.7 percent for domestic equities. Fixed income, however, made a positive contribution, with a 7.4 percent gain. At a 7.1 percent return last year, alternative strategies improved 340 basis points this year, while short-term securities/cash/other gained 1.1 percent last year versus no change this year.

"What is most notable about returns in FY2013," said John S. Griswold, Executive Director of Commonfund Institute, "is that both more diversified and less diversified portfolios produced good returns and risk was generally muted. We attribute much of this to the record low interest rate investment environment created by the Federal Reserve, although we will now have to wait and see how the withdrawal of monetary support affects investment portfolios."